This past year, during the pandemic, Healthfuse sought out a private equity partner as part of a new capital raise round.
“It's not the way we drew it up, I'll tell you that,” says Nick Fricano, co-founder, president and CEO, Healthfuse.
In fact, he says he didn't go into 2020 thinking that the raise was going to happen, but he knew at some point the company was going to go down that path. The deal with New Capital Partners happened in the pandemic because the company hit an inflection point.
“We’re 10 years old we've had high growth for 10 consecutive years and we simply grew to a size where we realized that we needed to do things differently going forward if we were going to continue to grow,” Fricano says. “One of those things that we knew we needed to do is we needed to build out a leadership team. That's just one of the examples. And though doing so isn't without additional investment, it isn't without risk, and we agreed that it was time to align with a group that had more experience with scaling and making the necessary upfront investments required to grow the business long-term.”
Ultimately, he says, the company wanted to align with a partner that was comfortable with sacrificing some short-term profitability, which we had previously really enjoyed, to build long-term enterprise value.
Fricano says part of what interested him in New Capital Partners was their approach to building companies based on strong culture, mission, purpose — that it wasn’t about short-term gains, but more about long-term enterprise value.
“They had a proven track record of taking companies like ours and taking it to the next level, and I thought just philosophically we aligned in many ways.”
The company still went through a process, bringing on an investment banker that really knew health care and the financial side of health care very well. They also went through a process — developing a confidential information memorandum, going to market getting indications of interest, doing management presentations.
“Frankly there was quite a bit of interest in Healthfuse, which was certainly validating as a founder. But at the end of the day, when we looked at the options in front of us, (we were) really thrilled that we ultimately chose the partner that we wanted to be our partner.”
Fricano says the advice he would offer others going through a similar situation is to listen to the questions.
“When you go through a process and you have a number of potential strategic investors or financial investors asking questions, that is very telling around how the market sees your business,” he says. “Listen to that. Even if you don't end up going through a transaction, you're going to learn a tremendous amount just by the nature of the questions. And they oftentimes are leading — whether it's on building the team or how other companies view your asset as a business, so there have been profound lessons learned that way.”
Fricano spoke at the recent Milwaukee Smart Business Dealmakers Conference about his experience transacting during the pandemic, and the lessons he takes away from the deal. Hit play on the video above for the full conversation.
